Comcast's strategic conquest

Comcast’s $45.2 billion bid for Time Warner Cable is being hailed as a smart short-term strategic move by the media giant perched atop the rapidly changing marketplace of television and the Internet.

And thanks to the country’s insatiable craving for faster and faster broadband services, the pending merger is also looking good for the company in the long term.

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Capitol Hill hearings start this week, with regulatory filings on the proposed deal expected any day now. But even Comcast’s critics and top lawmakers scrutinizing the merger give credit to the company for crafty brinkmanship in its continued conquest of competitors.

The combined company would of course face many challenges to stay No. 1. Comcast has long been plagued by complaints of poor customer service, and expanding its reach to 19 of the country’s 20 largest TV markets is already generating an even louder chorus of critics.

Competitors like AT&T, Verizon and someday even Google — the Silicon Valley kingpin is promoting a new fiber Internet service with speeds up to 100 times faster than a typical broadband connection — could make it easier for consumers to cancel their cable subscription but still watch their favorite shows online via YouTube and Netflix. The battered economy also means many Americans are spending their paychecks on food, rather than the Food Network.

Still, industry insiders see Philadelphia-based Comcast as up to the task. While cable TV as it’s known today may not be around in a decade, that’s very different from saying consumer demand for video is dead, or that an acquisition like the one Comcast now has pending before federal regulators and Congress won’t matter for many years to come.

“It’s positioned itself to be even more of a dominant force, both as a programming distributor, content owner and broadband provider,” said Jeffrey Silva, a media and technology analyst.. “I think 10 years from now it’ll still be one of the largest, if not the most influential player, in the tech-media-telecom arena.”

Comcast executives appear determined to avoid the fate of other big media players that didn’t move fast enough adapting to consumer demands and new technological innovations. Think of the way iTunes and digital recordings crushed the music industry or what Craigslist’s classifieds did to local newspapers.

By the end of this year, industry experts predict that cable companies will actually have more broadband customers than TV customers. In acquiring Time Warner Cable, Comcast fits that mold. While its traditional cable TV subscribers will number about 30 million, it will also be offering high-speed Internet access to about 40 percent of all U.S. households.

“No matter how you get access for entertainment or information, it’s going to be coming across Comcast’s infrastructure. So they win either way,” said Susan Crawford, President Barack Obama’s former special assistant for science, technology and innovation policy and a critic of the Comcast-TWC deal.

Brian Roberts, Comcast’s CEO, has talked up the merger as a win for consumers while also playing down the deal’s anticompetitive side by noting the two companies don’t overlap in their service territories. “This transaction will create a world-class blue-chip company, committed to innovation,” he said during a conference call in mid-February to announce the deal.

In homes, that means Comcast is trying to deliver faster high-speed Internet, tablet-like technologies to make television watching an easier experience and interactive home security and energy systems. On the go, it means it’s aiming to create the largest Wi-Fi hot spot system in the country.

The merger also is about trying to stay ahead of an industry where content — and the ways to access it — changes almost daily. Just consider Netflix’s entry into original programming with hit shows like “House of Cards” and “Orange Is the New Black,” Disney making its films available online only for Apple products, or ESPN launching 15 college sports networks that are available only to AppleTV and Roku subscribers.

“The rationale for this transaction is all about scale. We’re going to get bigger. I’m not walking away from that. But the critical benefits from this transaction will run from that scale,” David Cohen, Comcast’s executive vice president, said in an interview with C-SPAN’s “The Communicators” that aired in late March.

Television industry leaders say they’re ready for more change — even if they also struggle to say what the next big thing will be.

“I believe television will change more in the next five years than in the last 50,” Roberts told Bloomberg Businessweek in 2012 when asked about the future of TV.

“My favorite example is someone in 1850 taking care of horses as a farrier,” Netflix CEO Reed Hastings responded to a similar question in an interview with Maclean’s published in December. “They would have said, ‘Look, horses have been part of human existence for 5,000 years. We are horse people. It’s permanent.’”

“But all of a sudden, the internal-combustion engine comes along and, with it, oil fields and automobiles, which basically replace the horse completely,” Hastings said. “So we often have these long periods of stability and then a sudden inflection point. Maybe there will be some magic around something like Google Glass or a smart watch, but it won’t happen for the next few years.”

TiVo CEO Tom Rogers said in an interview that cable companies have so far largely missed out on providing the kind of consumer experience many people want — the way that digital music now allows someone to purchase pretty much any song ever recorded and carry it with them for on-the-go listening.

“They’ve gotten close,” Rogers said. “But they never figured out that the broadband pipe should be a key to TV as well, and leverage their role as the leading video provider to be this player that was providing all things, whenever you want it, to any device wherever you want it, personalized in the most usable form possible.”

“I think the challenge for the whole industry is are they going to be able to get there and get there fast enough before alternative means of providing that experience may develop,” he added.